Fair Work Commission orders significant changes to casual employment rules, including award obligation of casual conversion to full/part time employment.

Casual right to convert to permanent employment

On 5 July 2017, the Fair Work Commission (FWC) issued a decision regarding casual and part time employment as part of its 4 yearly review of modern awards (Decision). The Decision makes a range of significant changes to rules regulating how businesses employ casual workers. Most significantly, the FWC has decided to vary 85 awards that do not currently have a casual conversion clause to include a clause requiring businesses to convert casual employees to either permanent part time or full time employment in particular circumstances. This will apply where:

the employee has been employed with the business for at least 12 months;

the employee has ongoing over that 12 months worked a pattern of hours which, without significant adjustment, could be worked under the full/part time provisions of the award.

Employers will be required to provide all casual employees with a copy of the casual conversion clause (whether they become eligible for conversion or not) within the first 12 months of their engagement.

What will ‘converted’ employees become entitled to?

Employees who successfully convert to permanent employment will become entitled to all the usual entitlements that apply to full and part time employment – including paid annual and personal (sick and carer’s) leave, redundancy pay, minimum weekly guaranteed hours of work, differing penalty rates and other financial entitlements, changes to rostering and hours of work rules, and other entitlements. They will also become entitled to greater notice pay, and in the event of employee claims (such as unfair dismissal claims) may seek (and obtain) greater financial awards.

Will casuals who convert automatically lose their 25% casual loading?

The loss of the 25% casual loading for ‘converted’ casuals is not dealt with in the Decision. However, for employees paid at award level, when they commence permanent employment their minimum entitlement will be the permanent employee rate of pay for their classification under the award (without the casual loading).

Does this mean business is obliged to convert all casual employees?

No. An employee’s election to become permanent may be refused on the grounds that:

it would require a significant adjustment to the casual employee’s hours of work to accommodate them in full/part time employment in accordance with the applicable award;

it is known or reasonably foreseeable that the casual employee’s position will cease to exist or the employee’s hours of work will significantly change or be reduced in the next 12 months, or

on other reasonable business grounds based on facts which are known or reasonably foreseeable.

The FWC is inviting further submissions by interested parties on the proposed clause. Employers should seek specialist employment law advice regarding how and when they respond to requests.

Employees can refer their employer to the FWC to be dealt with under the award dispute resolution procedures.

Can businesses dismiss an employee or reduce their hours to avoid casual conversion?

The award right to seek to convert from casual to permanent employment will be protected, and a business that terminates an employee’s employment (or reduces their hours of work or takes any other form of adverse action) for reasons including this right will be exposed to a general protections claim. These claims currently permit employees to seek unlimited damages and penalties of up to $63,000 against companies (and $12,600 against individuals).

Other changes to awards.

The Decision also involved a range of other changes to awards, including:

changes to rules regarding whether casual employees are entitled to overtime for hours in excess of 38 per week or work in excess of specified daily hours (which differs between awards);

the introduction of a 2 hour casual minimum engagement period for awards that do not currently have one, or changes to the minimum engagement period in a range of awards;

changes to the terms regarding the engagement of part time employees (particularly in the hospitality, registered clubs and restaurant industries);

various other changes.

The FWC refused a bid to provide for casual employment for production and engineering employees in the black coal industry.

Implications for Employers

Businesses must understand their responsibilities when these changes come into effect to avoid breaching award and Fair Work Act entitlements, exposing them to penalties of up to $63,000 per breach for companies and $12,600 for individuals.

Businesses should:

identify whether their award/s is one of the 85 that will contain the casual conversion clause;

ensure procedures are in place to ensure compliance with the new obligations;

identify who their casual employees are and their length of service, and deal with (and lawfully accept or deny) requests for casual conversion.

For more specific advice about what this decision means for your business, please contact our office.

Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice. It should not be relied upon and specific legal advice always be sought before taking any action.